Trade bodies urge more transparency on central counterparty risk

21 October 2016 | 3830 views | 0Source: Futures Industry Association

FIA joined four industry trade associations in a response to proposed guidance from the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissions (IOSCO) on resilience and recovery of central counterparties (CCPs).

FIA, along with the Global Financial Markets Association (GFMA), the Institute of International Finance (IIF), the International Swaps and Derivatives Association, Inc. (ISDA) and the Clearing House (TCH), strongly support the CPMI-IOSCO guidance on this critical issue.

“We appreciate that CPMI-IOSCO took a consultative and open approach to develop this guidance, holding roundtables and taking into account industry feedback” said Walt Lukken, president and CEO of FIA. “Central counterparty clearing is critical to our financial system and now, more than ever, effective and transparent risk management, resiliency and recovery planning is critical to strong global markets.”

While FIA was broadly supportive of CPMI-IOSCO’s work, in some areas the trade associations recommended that the guidance be enhanced or clarified to provide greater transparency to clearing members. The trade associations’ comments touched on governance, stress testing, coverage, margin, CCP contributions to losses, and recovery.

“Clearing members are the foundation of the clearing ecosystem and they play a critical role in the reduction of systemic risk in global financial markets,” Lukken said. “Our recommendations to CPMI-IOSCO are focused on aligning incentives at CCPs and enhancing clearing members’ ability to assess and manage CCP risk through greater transparency. We look forward to continuing to work with CPMI-IOSCO and other regulators on strengthening our financial markets through CCP resiliency.”

FIA has been actively engaged on this issue, publishing a position paper on CCP risk in 2015, taking part in regulatory roundtables, holding educational events for market participants, and publishing the CCP Risk Review, an interactive tool that helps market participants analyze and compare the rules and procedures of CCPs worldwide.